Malta's €120m loan to IMF a 'one-off'

A €120 million loan by the Central Bank to the International Monetary Fund was a one-off credit that formed part of an agreement to help economies facing financial crises, Finance Minister Tonio Fenech said yesterday.

The loan follows an agreement signed on Friday by Slovakia, Malta and Belgium for the IMF to borrow a total of €5.3 billion.

Under the agreement, Belgium forked out the biggest loan, €4.7 billion, followed by a €440 million loan from Slovakia.

The deal is part of a commitment made by the EU in March to contribute up to €75 billion to support the IMF's lending capacity. Since then, the EU has committed an additional €50 billion to the fund.

Mr Fenech explained that rich countries would contribute to the fund, which would then, in turn, be used to help support countries in difficulty.

"If this fund was not there, then the global crisis would become much worse," he said. For example, the IMF had recently given financial support to Eastern European countries, Mr Fenech said. "Each country has to pool in its share in the fund."

The Central Bank's loan did not come out of the taxpayer's money but out of the bank's assets, he said. Since Malta was a member of the IMF, it had to pull its weight and make its contribution to the fund.

"The flexibility of the IMF has to increase or else there will be a larger economic crisis. It is insurance for every country," Mr Fenech explained.

Malta's share of €120 million was a one-off loan and would be repaid with interest. This was the way the monetary system worked, he added.

He pointed out that some countries were facing problems in raising their share of the loan, such as Greece, for example. "If the country doesn't pay its share, then there will be trouble when it will be in need."

Fifteen other IMF member states, including 10 EU states, have signed agreements to either lend directly to the fund or buy bonds. Another 26 countries have made a commitment to contribute to the fund's resources.